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Monday, 30 March 2009
GM, Chrysler Must Revamp Plans to Get More U.S. Aid
General Motors Corp. and Chrysler LLC must overhaul their recovery plans with deeper concessions to justify further taxpayer aid, and bankruptcy may ultimately be their best chance, an Obama administration official said.
GM, Chrysler Must Revamp Plans to Get More U.S. Aid
By John Hughes 31 March 2009
(Bloomberg) -- General Motors Corp. and Chrysler LLC must overhaul their recovery plans with deeper concessions to justify further taxpayer aid, and bankruptcy may ultimately be their best chance, an Obama administration official said.
The administration demanded the resignation of GM Chief Executive Officer Rick Wagoner, and the company said he will be replaced by Fritz Henderson, its president and chief operating officer. GM will also replace most of its board and must place greater reliance on producing more fuel-efficient vehicles, under findings to be announced today at the White House by President Barack Obama.
Chrysler will get $6 billion in aid only if it completes a partnership with Italian carmaker Fiat SpA in 30 days, said the administration official, who spoke to reporters and declined to be identified before Obama presents the decision. Unless it combines with Fiat, Chrysler won’t get any more U.S. help because it isn’t viable as a stand-alone company, the administration found.
Auburn Hills, Michigan-based Chrysler values its proposed technology sharing with Turin-based Fiat at $8 billion to $10 billion. Assuming the accord between the two companies is approved, Fiat will produce its first model with Chrysler in 2011, Fiat CEO Sergio Marchionne has said.
Detroit-based GM sought as much as $16.6 billion in additional aid after receiving $13.4 billion since December. Chrysler sought $5 billion after receiving $4 billion. Both had to show progress by the end of this month in matters such as GM’s need to reduce unsecured debt by two-thirds.
Tasks Not Completed
Neither company completed the tasks, the administration official said. The aid plans submitted to the government Feb. 17 don’t warrant additional assistance, the administration concluded. GM’s plan to cut unsecured debt by two-thirds wasn’t sufficient, and Chrysler’s debt was far beyond what the company could sustain, the official said.
GM’s plan wouldn’t lead to success even in an improved economy, the administration found. The new strategy sought by the administration would focus on sustainable profit and significant changes in brands, workforce, nameplates and the retail network. Board member Kent Kresa will serve as GM’s interim chairman.
Kresa is a former chairman and chief executive of Northrop Grumman Corp., the third-largest U.S. defense company. He is also chairman of Avery Dennison Corp., which develops self adhesives for consumer products.
Kresa, Henderson Comment
It’s “not yet known” who the board will nominate to constitute the new majority of directors at the next annual meeting, Kresa said in a statement posted on GM’s Web site. Wagoner said in a separate statement that Henderson is “an excellent choice” to replace him and “the ideal person” to lead the company through restructuring.
GM, which will continue to receive an undisclosed amount of government aid as it develops a new plan over 60 days, will get greater guidance from the Treasury and outside advisers in the process than previously, according to the administration. The government was silent on how much more aid GM may receive if it devises a successful plan.
Chrysler’s plan included assumptions that were unrealistic or overly optimistic, according to the administration. Chrysler is being required to get greater concessions from the United Auto Workers than its plan requires and must get rid of the vast majority of outstanding secured debt.
The government will support Chrysler for 30 days as it attempts to make final its agreement with Fiat. Chrysler has proposed giving Fiat a 35 percent stake in the company.
Chrysler Corp., as it was known then, took out $1.2 billion in government-backed loans in 1980 and repaid the money in 1983.
Quick Bankruptcy
Both companies’ best chance at success may include a quick and surgical bankruptcy, according to the administration. Unlike a liquidation or conventional bankruptcy, a structured process would make it easier for the companies to clear away liabilities.
The bankruptcy process could be as short as 30 days, and the government would provide so-called debtor-in-possession financing for the companies if needed, according to the administration. Still, bankruptcy isn’t the administration’s first choice, the official said.
To help encourage car sales, the administration will back warranties so consumers who buy cars during the restructuring have confidence the guarantees will be honoured even if the companies go out of business, according to the administration.
Edward Montgomery, an economist and former Labor Department deputy secretary, will be appointed to a new post of Auto Recovery Director to help communities hurt by job losses in the industry.
People have to realize, that recovery will be veeery painful - thousands people fired, dozens of bonuses canceled. That's reality. some merge with FIAT, another problematic company, can hardly help. Industry is ruled by Japan, soon there will be Korea or even India on the top positions. "American Car" has to change its face. Regards, Elli
2 comments:
GM, Chrysler Must Revamp Plans to Get More U.S. Aid
By John Hughes
31 March 2009
(Bloomberg) -- General Motors Corp. and Chrysler LLC must overhaul their recovery plans with deeper concessions to justify further taxpayer aid, and bankruptcy may ultimately be their best chance, an Obama administration official said.
The administration demanded the resignation of GM Chief Executive Officer Rick Wagoner, and the company said he will be replaced by Fritz Henderson, its president and chief operating officer. GM will also replace most of its board and must place greater reliance on producing more fuel-efficient vehicles, under findings to be announced today at the White House by President Barack Obama.
Chrysler will get $6 billion in aid only if it completes a partnership with Italian carmaker Fiat SpA in 30 days, said the administration official, who spoke to reporters and declined to be identified before Obama presents the decision. Unless it combines with Fiat, Chrysler won’t get any more U.S. help because it isn’t viable as a stand-alone company, the administration found.
Auburn Hills, Michigan-based Chrysler values its proposed technology sharing with Turin-based Fiat at $8 billion to $10 billion. Assuming the accord between the two companies is approved, Fiat will produce its first model with Chrysler in 2011, Fiat CEO Sergio Marchionne has said.
Detroit-based GM sought as much as $16.6 billion in additional aid after receiving $13.4 billion since December. Chrysler sought $5 billion after receiving $4 billion. Both had to show progress by the end of this month in matters such as GM’s need to reduce unsecured debt by two-thirds.
Tasks Not Completed
Neither company completed the tasks, the administration official said. The aid plans submitted to the government Feb. 17 don’t warrant additional assistance, the administration concluded. GM’s plan to cut unsecured debt by two-thirds wasn’t sufficient, and Chrysler’s debt was far beyond what the company could sustain, the official said.
GM’s plan wouldn’t lead to success even in an improved economy, the administration found. The new strategy sought by the administration would focus on sustainable profit and significant changes in brands, workforce, nameplates and the retail network. Board member Kent Kresa will serve as GM’s interim chairman.
Kresa is a former chairman and chief executive of Northrop Grumman Corp., the third-largest U.S. defense company. He is also chairman of Avery Dennison Corp., which develops self adhesives for consumer products.
Kresa, Henderson Comment
It’s “not yet known” who the board will nominate to constitute the new majority of directors at the next annual meeting, Kresa said in a statement posted on GM’s Web site. Wagoner said in a separate statement that Henderson is “an excellent choice” to replace him and “the ideal person” to lead the company through restructuring.
GM, which will continue to receive an undisclosed amount of government aid as it develops a new plan over 60 days, will get greater guidance from the Treasury and outside advisers in the process than previously, according to the administration. The government was silent on how much more aid GM may receive if it devises a successful plan.
Chrysler’s plan included assumptions that were unrealistic or overly optimistic, according to the administration. Chrysler is being required to get greater concessions from the United Auto Workers than its plan requires and must get rid of the vast majority of outstanding secured debt.
The government will support Chrysler for 30 days as it attempts to make final its agreement with Fiat. Chrysler has proposed giving Fiat a 35 percent stake in the company.
Chrysler Corp., as it was known then, took out $1.2 billion in government-backed loans in 1980 and repaid the money in 1983.
Quick Bankruptcy
Both companies’ best chance at success may include a quick and surgical bankruptcy, according to the administration. Unlike a liquidation or conventional bankruptcy, a structured process would make it easier for the companies to clear away liabilities.
The bankruptcy process could be as short as 30 days, and the government would provide so-called debtor-in-possession financing for the companies if needed, according to the administration. Still, bankruptcy isn’t the administration’s first choice, the official said.
To help encourage car sales, the administration will back warranties so consumers who buy cars during the restructuring have confidence the guarantees will be honoured even if the companies go out of business, according to the administration.
Edward Montgomery, an economist and former Labor Department deputy secretary, will be appointed to a new post of Auto Recovery Director to help communities hurt by job losses in the industry.
People have to realize, that recovery will be veeery painful - thousands people fired, dozens of bonuses canceled. That's reality. some merge with FIAT, another problematic company, can hardly help. Industry is ruled by Japan, soon there will be Korea or even India on the top positions. "American Car" has to change its face.
Regards,
Elli
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